The "At Par" Foreclosure Defense: Why It Doesn't Work
Distinguishing valid constitutional strategies from flawed legal theories
Educational Purpose: This analysis examines a widely circulated but fundamentally flawed foreclosure defense theory to help users distinguish valid constitutional arguments from invalid "sovereign citizen" theories. Understanding why this theory fails is essential for focusing on strategies that actually work.
A legal theory circulates online claiming that promissory notes deposited with Federal Reserve agent banks are received "at par" (face value), thereby extinguishing any debt obligation and making foreclosures based on alleged outstanding debts unconstitutional. This theory traces the "par-value doctrine" from 1775 through 1913, citing numerous Acts of Congress and Supreme Court precedents.
Why This Theory Fails:
- • Misinterprets "at par": Means acceptance at face value, NOT debt extinguishment
- • Misreads Federal Reserve Act: Section 13 authorizes banking operations, not debt cancellation
- • Cites cases out of context: Supreme Court precedents do not support the theory's claims
- • Zero court successes: No documented cases where this defense worked
- • Confuses banking operations with debt obligations: Rediscounting does not extinguish private debts
Valid Foreclosure Defenses That DO Work:
- • Adhesion contract unconscionability challenges
- • Lack of standing (failure to prove note ownership)
- • Due Process violations in foreclosure procedures
- • Verification of debt and chain of title
- • Constitutional challenges to state foreclosure statutes
The Theory Explained
The "at par" foreclosure defense theory makes the following claims:
- 1. Par-value doctrine established in 1775 by Continental Congress remains valid law
- 2. Federal Reserve Act Section 13 requires promissory notes be received "at par"
- 3. Deposit of promissory note extinguishes debt obligation immediately
- 4. State non-judicial foreclosure statutes cannot override federal par-value law
- 5. Foreclosures based on "extinguished" debts constitute unconstitutional takings
The theory demonstrates extensive historical research, citing Acts of Congress from 1775 through 1913, Statutes at Large references, and Supreme Court precedents. It correctly invokes the Article VI Supremacy Clause and Fifth Amendment Due Process protections. The research appears thorough and the constitutional framework seems sound.
So why doesn't it work?
What "At Par" Actually Means
The par-value doctrine was established to prevent discrimination against federal currency. During periods when the value of paper money was uncertain (especially during and after the Revolutionary War), creditors might refuse to accept federal notes at face value, demanding a premium.
Example: If gold is scarce and paper money is distrusted, a creditor might demand $110 in Federal Reserve notes to satisfy a $100 debt. The "at par" doctrine prevents this discrimination by requiring creditors to accept federal currency at its face value.
What "At Par" Means:
If you owe $100 and pay with a $100 Federal Reserve note, the creditor must accept it at $100 (not demand $110 because they distrust the currency). The debt is satisfied by payment, not by the mere existence of the note.
What "At Par" Does NOT Mean:
- • Debt extinguishment upon deposit
- • Conversion of private debt to federal obligation
- • Elimination of repayment obligation
- • Automatic satisfaction of debt without payment
The Theory's Critical Error: It conflates "acceptance at face value" with "debt extinguishment at deposit." These are fundamentally different concepts.
Federal Reserve Act Section 13: What It Actually Does
"Any Federal reserve bank may discount notes, drafts, and bills of exchange arising out of actual commercial transactions..."
What This Statute Actually Authorizes
Federal Reserve Banks can provide liquidity to member banks by "discounting" (buying at a discount) eligible commercial paper. This is a banking operation between the Fed and member banks—it does NOT extinguish the underlying private debt.
- Step 1: Homeowner borrows $200,000 from Bank A, signs promissory note
- Step 2: Bank A may rediscount the note with the Federal Reserve to obtain liquidity
- Step 3: Federal Reserve advances funds to Bank A (minus discount/interest)
- Step 4: Homeowner still owes Bank A $200,000—the debt is NOT extinguished
- Step 5: If homeowner defaults, Bank A (or its assignee) can foreclose
The Theory's Error: Assumes that because the note is "deposited" with the Fed for rediscounting, the homeowner's debt disappears. This fundamentally misunderstands the relationship between banking operations and private debt obligations.
Key Distinction:
The promissory note is a negotiable instrument. The homeowner's obligation continues until the debt is paid, not merely because the note changes hands or is used as collateral for banking operations.
Why Courts Reject This Argument
The most telling evidence against this theory is the complete absence of any documented court case where this defense succeeded in stopping a foreclosure.
If this theory worked, it would be:
- • Widely known and used by foreclosure defense attorneys
- • Cited in legal treatises and practice guides
- • Referenced in appellate court decisions
- • Taught in law schools as a valid defense
None of these are true. Courts consistently reject this argument, likely dismissing it as frivolous.
Supreme Court Precedents Cited Out of Context
The theory cites several Supreme Court cases to support its claims. However, these cases do NOT actually support the theory when examined in context:
Perry v. United States (1935)
What it held: Congress cannot abrogate its own monetary obligations (gold clause cases)
Does NOT support: The claim that private promissory notes become federal obligations extinguishing private debt
Knox v. Lee (Legal Tender Cases)
What it held: Congress can make paper money legal tender
Does NOT support: The claim that deposit of a note extinguishes the underlying debt
Lesson: Citing cases out of context can make any theory appear valid. Understanding what cases actually hold (the legal principle) versus what they say (dicta) is essential for evaluating legal theories.
Valid Foreclosure Defenses That DO Work
Instead of relying on flawed theories, focus on constitutional strategies with documented successes:
Challenge mortgage contracts as adhesion contracts with unconscionable terms that violate Due Process and Equal Protection. Focus on lack of meaningful choice and one-sided terms.
Require foreclosing party to prove ownership of the note and mortgage. Many foreclosures fail when the plaintiff cannot establish proper chain of title or standing to sue.
Challenge foreclosure procedures that fail to provide adequate notice, opportunity to be heard, or comply with constitutional due process requirements.
Demand verification of the debt amount, accounting of payments, and proof that default occurred. Challenge inflated fees, improper charges, and calculation errors.
Natural Person Sovereignty: What It Protects (and What It Doesn't)
The "at par" theory often invokes Natural Person Sovereignty to claim that foreclosures violate unalienable rights. While Natural Person Sovereignty is a foundational principle of constitutional restoration, it's important to understand its proper application.
- • Unconstitutional government actions
- • Deprivation of rights without due process
- • Violations of unalienable rights
- • Government overreach beyond constitutional authority
- • Regulatory takings without just compensation
- • Consequences of voluntary contractual agreements
- • Foreclosure remedies agreed to in mortgage contracts (when constitutional due process is followed)
- • Obligations freely entered with full knowledge
- • Private contract enforcement
Key Principle:
Natural Person Sovereignty means individual rights cannot be overridden by government convenience. It does NOT mean freedom from contractual obligations voluntarily entered or immunity from foreclosure after default on agreed terms.
Valid Application: Challenge foreclosures that violate constitutional due process, lack proper standing, or involve unconscionable adhesion contracts. These are legitimate constitutional arguments grounded in Natural Person Sovereignty.
Invalid Application: Claim that voluntary mortgage contracts are automatically void because of misinterpreted monetary statutes. This misapplies Natural Person Sovereignty principles.
Lessons for Constitutional Restoration
1. Historical Research ≠ Correct Legal Interpretation
The "at par" theory demonstrates extensive historical research but misinterprets the legal effect of the statutes cited. Research must be combined with correct legal analysis.
2. Supreme Court Precedent Must Be Applied in Context
Citing cases out of context can support invalid theories. Understand what cases actually hold, not just what they say.
3. Voluntary Contracts Create Enforceable Obligations
Natural Person Sovereignty does NOT eliminate contractual obligations. Mortgages are voluntary agreements with foreclosure remedies.
4. Court Success Rate Indicates Theory Validity
If a theory never works in court, it's probably invalid. Focus on strategies with documented successes.
5. Federal Supremacy Requires Actual Conflict
Federal law supersedes conflicting state law, but state foreclosure laws do NOT conflict with par-value statutes (because par-value doesn't extinguish debts).
Conclusion: Focus on Constitutional Strategies with Merit
The "at par" foreclosure defense theory presents a sophisticated but fundamentally flawed legal argument. While it demonstrates extensive historical research and correct citation of federal supremacy principles, it misinterprets the "at par" doctrine and Federal Reserve Act Section 13 to claim that promissory notes deposited with Federal Reserve Banks extinguish the underlying debt obligations.
Many "sovereign citizen" and "redemption" theories circulate online. Some contain kernels of truth (federal supremacy, property rights) but misapply legal principles. The Unalienable Redemption platform distinguishes between:
- • Valid constitutional arguments: Standing doctrine challenges, void ab initio, oath/bond enforcement, adhesion contract unconscionability
- • Invalid theories: Debt extinguishment at deposit, "at par" foreclosure defense, misinterpretation of monetary statutes
Our approach: Teach constitutional principles correctly, expose where theories go wrong, and provide reality checks on legal strategies.